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W. Marc Bernsau
MHT's Julie Donnelly: Life science startups finding investments
MHT's Efrain Viscarolasaga: Tech companies may have to wait for stimulus funds
How is the economic crisis affecting tech companies?
A handful of local life sciences companies have sprung to life over the past several months, in spite of a venture capital landscape that has sometimes looked windswept and barren.
“The pace of deals is slower, but investors still have to put their money somewhere,” said Harry Glorikian, managing partner at Scientia Advisors LLC in Cambridge. Glorikian said firms have been creative in rounding up funds.
Companies that have successfully launched in this environment have powerful allies and a frugal mindset. Several are going after a platform that could target several diseases. Analysts say this approach gives the company several shots at profitability, making them more attractive to investors.
When Walter Ogier decided to join the nascent Acetylon Pharmaceuticals Inc. just weeks after the Wall Street meltdown, he wasn’t nervous. Now the CEO for the Cambridge firm, Ogier said that last fall, the company’s founders hoped to assemble a group of private investors, rather than chase — suddenly scarce — venture money. Last week, the company announced its official launch with $7.25 million from private investors, including a board member and The Kraft Group, run by Patriots owner Robert Kraft. “That group of investors came together quickly enough to close the round at the size we wanted without inviting venture capital,” Ogier said.
The company is setting its sights first on creating a treatment for multiple myeloma that might also be used for rheumatoid arthritis.
“We will be careful and conservative with money, given the current environment,” Ogier said. Now the only employee, he plans to bring on three more immediately. The company plans to make the money last for 18 months.
One way to make sure that a new company has the money it needs to launch is to get the money before the company even exists. That’s the story behind Forma Therapeutics Inc., which came out of nowhere in January with a deal worth up to $200 million with a venture fund run by the Swiss drugmaker Novartis AG. How they did it is no secret — the CEO was at that point a managing director at, yes, that Novartis Option Fund.
Steven Tregay got together some great minds, and they asked themselves this question, “What are the tools and technology we need to move forward on new cancer drugs?” Tregay said.
Forma will try to locate new mechanisms for fighting cancer. Because they knew the money was coming, they could do a lot of legwork in advance. “Often what happens with a Series A, one year later you are still sorting out space, hiring people, etc. But in our case, once the money came we were poised to work quickly.” The company quickly swelled to 65 people in three locations.
One company that did raise money from a traditional venture firm is Targ-Anox Inc. The company coalesced around technology discovered by Brigham and Women’s Hospital chief of medicine Joseph Loscalzo. Then it got a push by the Partners Innovation Fund. Managing partner Roger Kitterman committed a mere $250,000 to TargAnox, but that was enough to prompt Ascent Biomedical Ventures to kick in the rest of the $5.1 million round, which launched the company on March 30.
Kitterman said that in order to make the money last for three years, they won’t hire a CEO until the next funding round. The technology targets oxidative stress, which figures in auto-immune diseases, and diabetes. The upside of the recession is that some resources, like real estate, have become cheaper. “I’m a firm believer that you’re in the environment you’re in and you just deal with it,” Kitterman said.
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